Bell Helicopter won't ignore its commercial side, new CEO says

Bob Cox On Feb 11, 2010
Source: Fort Worth Star-Telegram, Texas

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Feb. 10--A rising tide of spending on the V-22 Osprey and on military helicopters has buoyed Bell Helicopter's revenues and profits, but the company's new chief executive says he will not ignore the commercial helicopter business, which has suffered during the recession.

Speaking to Wall Street analysts Tuesday, John Garrison said he wants to expand both the military and commercial sectors.

"We are executing a balanced business strategy. We're going to grow our commercial business and military business, and we're going to grow our support business," Garrison said at a conference in New York hosted by Bell's parent company, Textron Inc.

Bell's focus tilted heavily toward the military sector in 2009 as orders and deliveries of new helicopters by nonmilitary customers dropped sharply because of the credit crunch and recession.

Military aircraft sales accounted for 39 percent of Bell's $2.8 billion in revenues last year, compared with 24 percent for commercial helicopters. The rest was for parts, repairs and other services.

Industry observers globally have waited months for clues as to Bell's plans for development of new commercial aircraft or at least significant upgrades of existing models. Before the recession, Bell officials had talked confidently about development plans.

As the economy sank and orders for new airplanes and helicopters vanished almost overnight, heavily leveraged Textron slashed spending at all its businesses to raise cash. Its Cessna subsidiary canceled a long-awaited new aircraft program. Bell, employees of the Fort Worth-based company said, put virtually all its development activities on hold, other than completing certification of the model 429 helicopter.

Since taking over at Bell in August, Garrison has given few public speeches and granted few, if any, interviews, even to trade press.

Garrison offered no examples of commercial products the company continued to invest in or has plans to develop.

The new 429 model, for which Bell has said it has more than 300 commitments to buy (not firm orders), was approved for sale and production by U.S. and European aviation safety authorities last summer. The company so far has delivered two of the aircraft, which cost $4.5 million to $5 million, according to Tuesday's presentation.

"We're confident we'll be able to grow market share with that helicopter," Garrison said.

Bell had revenues of more than $2.8 billion in 2009 -- $1.1 billion from new military aircraft sales and $672 million from commercial helicopters. Sales of spare parts and accessories and the provision of various services to customers accounted for $1.07 billion.

Even with the economy in recession, Bell generated record cash flow, Garrison said, thanks to military revenues and cost-cutting efforts. The company has moved some work to a new facility in Mexico and cut about 300 jobs at its commercial helicopter assembly plant in Canada.

The company also has a record backlog of military orders as it stretches to ramp up production of the V-22 and new Marine H-1 helicopters. Bell delivered 20 V-22s last year and plans to deliver 28 this year, while receiving orders at a rate of 35 per year. Production is expected to peak at 40 V-22s in 2013.

After delivering nine new Marine helicopters last year, Bell expects to deliver 20 this year. It expects to boost production to 28 a year in 2014.

Bell performs the bulk of its engineering and product development work in Fort Worth, where it also manufactures major components for both military and commercial aircraft. The company has about 6,000 employees in the Fort Worth area. It assembles the V-22 and Marine helicopters in Amarillo.